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View Diary: Bill Maher says Romney's Mormon church donations are NOT charity (178 comments)

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  •  Tax deductions are subtracted from taxable income (1+ / 0-)
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    cacamp

    before the tax is figured. That means that the reduction in a person's tax is the percentage of their highest tax bracket, since it would have come from that highest percentage. The standard deduction for a single person is $5,700, so if you have less than $5,700 in deductions as a single person, it's better not to itemize your deductions and just take the standard deduction, but wealthy people virtually always have more, so they itemize deductions. For a married couple filing jointly, the standard deduction is $11,400.
         When you itemize, the charitable contrbutions are added to the various other deductions such as mortgage interest, business expenses, etc., and that amount is subtracted from the income before the tax is figured.
         For people married filing jointly, the tax brackets are as follows:
    The first $0 – $17,400 are taxed at 10%.
    The next $17,401 – $70,700 are taxed at 15%.
    The next $70,701 – $142,700 are taxed at 25%.  
    The next $142,701 – $217,450 are taxed at 28%.  
    The next $217,451 – $388,350 are taxed at 33%.  
    And everything over $388,350 is taxed at 35%.
         So, for a wealthy person with total income over $388,350 after all the deductions are taken, the deductions all save 35% in taxes. That still means that whatever a wealthy person contributes to charity, 65% of it would still have been their money if they hadn't donated it.
         These deductions still save more money for the very wealthy than others, since their top tax rate is higher. For someone like me for example, even though I make a lot of money relatively speaking, my top tax rate is 28%, so my charitable contributions represent 28% tax money and 72% my money.

    -7.25, -6.26

    We are men of action; lies do not become us.

    by ER Doc on Sun May 06, 2012 at 01:40:01 AM PDT

    [ Parent ]

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